Legal Considerations



All goods imported into the United States are subject to duty or duty–free entry, depending on their classification under the applicable tariff schedule and their country of origin. For dutiable products, three different methods are used to levy tariffs:

   1.  Ad valorem duty: The duty levied is a percentage of the value of the imported product. It is the type of duty most often applied. An example would be a 2 percent ad valorem on imports of leather shoes. The duty obligation is proportional to the value of the dutiable cargo and bears no relation to the quantity imported.

   2.  Specific duty: This duty rate is based on the physical unit or weight or other quantity. Such duty applies equally to low– and high–priced goods. To the extent that the same duty rate is applied to similar goods with different import prices, specific duties tend to be more restrictive of low–priced goods. When the price of imports rises, the rate remains unchanged, and, subsequently, the effect of the specific duty declines. Examples would be a $9.00 per ton (wheat) or $2.50 per dozen (fountain pens) charges.

   3.  Compound duty: Compound duty combines both ad valorem and specific duty. An example would be $2.00 per pound and 4 percent ad valorem (chicken imports).

    Most merchandise imported into the United States is dutiable under the most–favored–nation (MFN) rate. The MFN principle is expressed in Article I of the GATT and in a number of bilateral and other treaties. Under this principle, any advantage or favor granted by the United States (a member of the GATT) to any import originating from any other country shall be accorded, unconditionally, to the like product originating from all other GATT/WTO members. If the MFN treatment is provided as a result of a bilateral treaty (MFN treatment for goods from China, not a member of the GATT/WTO), an obligation arises to treat imports from that country as favorably as imports from any other member of the GATT/WTO. Certain communist countries, such as Cuba  and North Korea, are not accorded MFN status and thus denied the benefit of the low rates of duty resulting from trade agreements entered into by the United States.

NonTariff Barriers

Even though most goods freely enter the United States, there are some restrictions on the importation of certain articles (see International Perspective 16.1 and Tables 16.1 and 16.2).  The rules prohibit or limit the entry of some imports, limit entry to certain ports, restrict routing, storage or use or require treatment, labeling or processing as a condition of release from Customs. US non-tariff barriers fall into the following categories (U.S. Department of Commerce, 2003):

Prohibited Imports

These imports include certain narcotics and drug paraphernalia (materials used to make or produce drugs); counterfeit articles; products sold in violation of intellectual property rights; obscene, immoral, and seditious matter, and merchandise produced by convicts or forced labor.

Imports Prohibited Without a License

 These include arms and ammunition, products from certain countries such as Cuba, Iran, and North Korea.

Imports Requiring a Permit

Such imports include alcoholic beverages, animal and animal products, plant products and trademarked articles.  For example, all commercial shipments of meat and meat food products offered for entry into the United States are subject to the regulations of the Department of Agriculture and must be inspected by the USDA Inspection Service before release by customs.

Imports with Labeling, Marking, and Other Requirements

 Certain imports require special labeling.  For example, wool and fur products must be tagged, labeled, or otherwise clearly marked to show the importer’s name and other required information. All goods imported must be marked individually with the name of the country of origin in English.

Imports Limited by Absolute Quotas

 These imports include dairy products, animal feed, chocolate, some bears and wines, textiles and apparel, cotton, peanuts, sugars, syrups, molasses, cheese and wheat.

Imports Limited by Tariff Quotas

The tariffs rates on these imports are raised after a certain quantity has been imported. This applies to cattle, whole milk, motorcycles, certain kinds of fish, and potatoes. Tariff quotas permit a specified quantity of merchandise to be entered or withdrawn for consumption at a reduced rate during a specified period. When imported merchandise exceeds a tariff quota, the importer is not allowed to commingle the merchandise and classification with non-quota class goods.

The Buy-American Act 1933

This act provides for the purchase of goods by the U.S. government (for use within the country) from domestic sources unless they are not of satisfactory quality or too expensive, or not available in sufficient quantity.  The procurement regulations allow for the purchase of domestic goods even though they are more expensive than competing foreign merchandise, insofar as the price differential does not exceed six percent (12 percent in high-unemployment areas) in favor of domestic goods.